Recent legal developments have brought both good news and bad news for Avvo. Let’s start with the bad news.

Earlier this year, Avvo launched Avvo Legal Services, a service offering fixed-fee, limited-scope legal help through a network of attorneys. In an earlier post, I explained how this works:

Avvo sets the services to be provided and the prices. Attorneys who sign up for the service can choose which legal services they want to offer. When a client buys the service, Avvo sends the client’s information to the attorney. The attorney then contacts the client directly and completes the service.

Clients pay the full price for the service up front. Once a month, Avvo deposits earned fees into the attorney’s operating account. As a separate transaction, it withdraws from the account a per-service marketing fee that the attorney pays to Avvo.

Some commentators and readers expressed concern that this arrangement could constitute inappropriate fee sharing. Avvo’s CEO Mark Britton and General Counsel Josh King dismissed that, maintaining that the arrangement is OK because the marketing fee is paid as a separate transaction.

Now, one ethics panel says otherwise. The South Carolina Bar’s Ethics Advisory Committee issued an opinion last month (Ethics Advisory Opinion 16-06) concluding that Avvo Legal Services violates the prohibition of sharing fees with a non-lawyer.

[T]he service collects the entire fee and transmits it to the attorney at the conclusion of the case. In a separate transaction, the service receives a fee for its efforts, which is apparently directly related to the amount of the fee earned in the case. The fact that there is a separate transaction in which the service is paid does not mean that the arrangement is not fee splitting as described in the Rules of Professional Conduct.

A lawyer cannot do indirectly what would be prohibited if done directly. Allowing the service to indirectly take a portion of the attorney’s fee by disguising it in two separate transactions does not negate the fact that the service is claiming a certain portion of the fee earned by the lawyer as its “per service marketing fee.”

The opinion further holds that the fee arrangement would violate the prohibition against giving anything of value to a person for recommending a lawyer’s services.

The service … purports to charge the lawyer a fee based on the type of service the lawyer has performed rather than a fixed fee for the advertisement, or a fee per inquiry or “click.” In essence, the service’ s charges amount to a contingency advertising fee arrangement rather than a cost that can be assessed for reasonableness by looking at market rate or comparable services.

Presumably, it does not cost the service any more to advertise online for a family law matter than for the preparation of corporate documents. There does not seem to be any rational basis for charging the attorney more for the advertising services of one type of case versus another.

A disclaimer attached to the opinion notes that the Ethics Advisory Committee has no disciplinary authority and that its opinion is purely advisory.

(H/T to Christopher Miller for bringing this to my attention.)

Now On to Avvo’s Good News

A California attorney has dropped his putative class action against Avvo in which he claimed that by using attorneys’ names and likenesses on its website, Avvo was violating California’s laws on rights of publicity and unfair competition.

Aaron H. Darsky, a San Francisco litigator, agreed to dismiss the case after Avvo brought a motion to strike the complaint under California’s anti-SLAPP law, according to Avv0’s press release.

Courthouse News Service, quoting Avvo GC Josh King, reports that Darsky agreed to dismiss the case to avoid paying Avvo’s attorneys’ fees after a judge indicated his claims couldn’t hold up. U.S. District Judge Haywood Gilliam made “very, very clear” that he would rule in Avvo’s favor, King told Courthouse News.

The order of dismissal was entered by Judge Gilliam on Aug. 2.

A similar class action remains pending in Illinois, according to Courthouse News.

Photo of Bob Ambrogi Bob Ambrogi

Bob is a lawyer, veteran legal journalist, and award-winning blogger and podcaster. In 2011, he was named to the inaugural Fastcase 50, honoring “the law’s smartest, most courageous innovators, techies, visionaries and leaders.” Earlier in his career, he was editor-in-chief of several legal publications, including The National Law Journal, and editorial director of ALM’s Litigation Services Division.